Regulator urges risk control amid yuan devaluation

TAIPEI -- Taiwan's financial regulator has said it will not set a cap on the amount of Chinese yuan deposits allowed to be held in the country, but has advised banks to do their best to conduct risk control.

Accumulated yuan deposits had increased to 214.5 billion yuan (US$34.92 billion) as of January, said Tseng Ming-chung (曾銘宗), chairman of the Financial Supervisory Commission (FSC), at a hearing of the Legislature's Finance Committee Wednesday.

“It's not much” compared with the 700-800 billion yuan held in Hong Kong, Tseng noted.

However, banks should make efforts to carry out risk control because the FSC will not set a limit on the amount of yuan deposits they are allowed to hold, he said in an effort to soothe lawmakers' worries about a depreciating yuan.

This past Wednesday, the reference rate for the yuan dropped by 0.16 percentage points from the previous day to 6.1343 against the U.S. dollar, the lowest level this year, according to data released by the Shanghai-based China Foreign Exchange Trading System.

Standard Chartered chief economist Fu Ming-choi described the recent yuan depreciation as a short-term adjustment because the currency had experienced a long period of appreciation that began in 2005.

He said that in the long run, the yuan's value will not increase on a large scale, while the short-term fluctuations will also not affect the globalization process of the currency.

The depreciation, however, has affected yuan buyers in Taiwan, dealers said, adding that the market at present is dominated by a wait-and-see attitude.

The market is uncertain whether the yuan has depreciated to its lowest point, the dealers said, attributing the recent drop to the U.S. dollar's fluctuations and data on China's macro economic performance.